A common measure of liquidity is
A) return on total assets.
B) accounts receivable turnover.
C) return on sales.
D) debt to equity ratio.

Question

Quizplus · Accepted Answer

Accounts receivable turnover is a measure of how quickly a company is able to collect outstanding payments from its customers, which indicates how easily it can convert its assets into cash to meet its short-term obligations. A high accounts receivable turnover ratio indicates good liquidity. The other options listed are not measures of liquidity, but rather measures of profitability (return on total assets and return on sales) or solvency (debt to equity ratio).

A Common Measure of Liquidity Is